Special Order Total cost data follow for Glendale Manufacturing Company, which has a normal capacity per period of 8,000 units of product that sell for $60 each. For the foreseeable future, regular sales volume should continue to equal normal capacity.

Variable and Absorption Costing Summarized data for 2016 (the first year of operations) for Gorman Products, Inc., are as follows:

Sales (75,000 units)					$6,000,000
Production costs (80,000 units)
Direct material					1,760,000
Direct labor					1,440,000
Manufacturing overhead:
Variable					1,088,000
Fixed					640,000
Operating expenses:
Variable					336,000
Fixed					480,000
Depreciation on equipment					120,000
Real estate taxes					36,000
Personal property taxes (inventory & equipment)					57,600
Personnel department expenses					60,000

a. Prepare an income statement based on full absorption costing. Only use a negative sign with your answer for net income (loss), if the answer represents a net loss. Otherwise, do not use negative signs with any answers. Round answers to the nearest whole number, when applicable.

Absorption Costing Income Statement
Sales						Answer
Cost of Goods Sold:
Beginning Inventory					Answer
Direct materials					Answer
Direct labor					Answer
AnswerGross profitOperating expensesVariable manufacturing overheadManufacturing overheadContribution margin					Answer
Less: Ending Inventory					Answer
Cost of Goods Sold						Answer
AnswerGross profitOperating expensesVariable manufacturing overheadManufacturing overheadContribution margin						Answer
AnswerGross profitOperating expensesVariable manufacturing overheadManufacturing overheadContribution margin						Answer
Net Income (Loss)						Answer

b. Prepare an income statement based on variable costing. Only use a negative sign with your answer for net income (loss), if the answer represents a net loss. Otherwise, do not use negative signs with any answers. Round answers to the nearest whole number, when applicable.

Variable Costing Income Statement
Sales						Answer
Variable cost of Goods Sold:
Beginning Inventory					Answer
Direct materials					Answer
Direct labor					Answer
AnswerGross profitVariable manufacturing overheadManufacturing overheadVariable operating expensesContribution margin					Answer
Less: Ending Inventory					Answer
Variable cost of goods sold						Answer
AnswerGross profitVariable manufacturing overheadManufacturing overheadVariable operating expensesContribution margin						Answer
AnswerGross profitVariable manufacturing overheadManufacturing overheadVariable operating expensesContribution margin						Answer
Fixed costs:
AnswerGross profitVariable manufacturing overheadManufacturing overheadVariable operating expensesContribution margin					Answer
Operating expenses					Answer
Total Fixed Cost						Answer
Net Income (Loss)						Answer

c. Assume that you must decide quickly whether to accept a special one-time order for 1,000 units for $60 per unit.

Which income statement presents the most relevant data? Answerabsorption costingvariable costing

Determine the apparent profit or loss on the special order based solely on these data. Use a negative sign with your answer if the special order creates an apparent loss. Round answer to the nearest whole number.

Notes: 1. Beyond normal capacity, fixed overhead costs increase $1,800 for each 500 units or fraction thereof until a maximum capacity of 10,000 units is reached. 2. Selling expenses consist of a 6% sales commission and shipping costs of 80 cents per unit. Glendale pays only three-fourths of the regular sales commission on sales totaling 501 to 1,000 units and only two-thirds the regular commission on sales totaling 1,000 units or more.

Glendale's sales manager has received a special order for 1,200 units from a large discount chain at a price of $36 each, F.O.B. factory. The controller's office has furnished the following additional cost data related to the special order:

1. Changes in the product's design will reduce direct material costs $1.50 per unit. 2. Special processing will add 20% to the per-unit direct labor costs. 3. Variable overhead will continue at the same proportion of direct labor costs. 4. Other costs should not be affected.

a. Present an analysis supporting a decision to accept or reject the special order. (Round computations to the nearest cent.)

Differential Analysis
	Per Unit	Total
Differential revenue		Answer
Differential costs
Direct material	Answer
Direct labor	Answer
Variable manufacturing overhead	Answer
Selling:
Commission	Answer
Shipping (F.O.B. factory terms)	Answer
Total variable cost	Answer	Answer
Contribution margin from special order		Answer
Fixed cost increment:
Extra cost		Answer
Profit on special order		Answer

b. What is the lowest price Glendale could receive and still make a profit of $3,600 before income taxes on the special order?

Round answer to two decimal places, if applicable.